In the first half of the year, the overall increase in profits of the fertilizer industry increased nitrogen fertilizer losses.

First, the basic situation of the fertilizer industry in the first half of the year

(I) The output of phosphate fertilizer and potash fertilizer increased rapidly, and the growth of nitrogen fertilizer stagnated. In the first half of 2010, China's fertilizer production was 33.972 million tons, an increase of 6.4% year-on-year. The output of nitrogen fertilizer, phosphate fertilizer, and potash fertilizer were 24.841 million tons, 7.837 million tons, and 1.791 million tons, respectively, an increase of 2.3%, 19.6%, and 14.7% respectively. Following China's urea production decline in May for the first time in five years, production continued to decline in June, a year-on-year decrease of 6.76%.

(II) The market price of some products is low for a long time. Affected by extreme weather such as rain, snow, drought, floods, etc., the fertilizer market experienced a phenomenon of no flourishing in the peak season and the overall situation showed a weak state. In particular, there was a serious oversupply of urea and phosphorus compound fertilizer. The price monitoring showed that the average price of urea in the first half of the year was 1,716.67 yuan/ton, which was a year-on-year decrease of 6.06%, showing a declining trend month by month.

(3) The total profit of the industry increased, and the number of nitrogen-loss-loss enterprises increased. According to statistics from the National Bureau of Statistics, the total profits of the fertilizer manufacturing industry in the first five months were 9.574 billion yuan, a year-on-year increase of 41.4%. There were 467 nitrogen fertilizer production enterprises, 13 less than the same period of last year. There were 196 loss-making enterprises with a loss of 42%. This year, 80 companies had ceased their production and withdrew, and the loss amounted to 2.27 billion yuan.

(4) The import and export volume grew faster than the same period last year. In the first half of the year, China imported 3.6931 million tons of chemical fertilizers, an increase of 35.97% year-on-year; and exported 4.1182 million tons of chemical fertilizers, an increase of 52.26% year-on-year.

II. Analysis of the chemical industry safety situation

(1) The adjustment of electricity price and natural gas price exacerbated the pressure of nitrogen fertilizer loss.

While the market demand at home and abroad continues to be sluggish, this year, the further increase in electricity prices and natural gas prices, as well as the increase in other corporate expenses, have caused the cost of urea production companies to increase by 180 to 280 yuan. / Ton, the full cost of 1734 yuan / ton, higher than the end of 2009 by 217 yuan / ton. Due to sluggish sales, the ex-factory price of urea fell month by month, market prices and product costs were upside down, and most companies suffered losses.

(II) The competitiveness of international fertilizer products has increased substantially, and low-priced products have entered the Chinese market.

With the increase in the cost of energy and raw materials such as coal, natural gas, electricity, phosphate ore, and **, the competitiveness of China's chemical fertilizers has been significantly reduced compared to the Middle East, Russia, and other countries. In the coming years, large-scale phosphoric acid and ammonium phosphate devices will be built in the Middle East, North Africa, and West Asia. The world’s largest phosphoric acid/diammonium phosphate plant under construction in Saudi Arabia has significant resource cost advantages. Morocco plans to set up 10 sets of 450,000 tons (P2O5) phosphoric acid plants, all of which will be exported to traditional Chinese export markets such as Asia. At that time, China's export of phosphate fertilizers will be severely suppressed, and at the same time it will impact the domestic market. In addition, according to the industrial damage warning system, the export of ternary compound fertilizer imported from the EU has soared by 254.46%, the price has dropped by 13.84% year-on-year, and the import value has reached USD 69.949 million, which requires urgent attention.

(3) The dependence of raw materials such as ** on foreign materials is relatively high, and the importers' stocks are serious.

China's import volume has accounted for 44% of international trade volume. From January to July this year, China imported 570,110,000 tons, a year-on-year decrease of 25.7%, but the amount increased by 60.1% year-on-year to US$717 million. In July of this year, the CIF price was US$128.5, an increase of 115.5% year-on-year. In late July, some domestic hoarders’ buying and pushing by leading suppliers accelerated the rate of price increase. In the past two months, domestic prices were pushed up by about 40%. ** The ups and downs of prices will have a serious impact on fertilizer production in the fall.

(4) The contradiction between overcapacity and overheated investment is highlighted.

By the end of 2010, China's total phosphate fertilizer production capacity exceeded 21 million tons P2O5 and domestic demand was approximately 12 million tons. Calculated at an operating rate of 80%, overcapacity was nearly 5 million tons. Urea's new production capacity has reached more than 20 million tons since 2005, accounting for 29% of the country's total production capacity, and the excess volume is about 10 million tons per year. At present, there are more than 8 million tons of urea capacity under construction and proposed construction, and the investment growth of the phosphate fertilizer industry in the first half of May was still as high as 86%. Overheated domestic investment has caused disorderly market competition, making it difficult for chemical fertilizer companies to survive.

Third, forecast

Based on farmers’ expectations for price increases in future food prices, the enthusiasm for investing in fertilizers will increase. The fertilizer market is expected to be slightly better in the second half of the year than in the first half of the year, but the downturn will not be reversed. Nitrogen fertilizer companies will reduce production, prices will fall, and the export situation will be less optimistic. The off-season reserves in the second half of the year will be lower than in previous years, which will be detrimental to the supply of nitrogen fertilizer in the spring of next year.